iShares Files for New Type of Muni Bond ETF

iShares has filed with the SEC for a line of ETFs that hold municipal bonds but with a twist.

iShares’ proposed line of new funds will hold muni bonds and the funds themselves would target certain maturity dates.

Each fund would hold the underlying securities from its respective index to full maturity, at which point the fund would simply retain a cash position, according to Index Universe. After the last holding of the fund hits maturity, which is on or around Aug. 31 of the year in the fund’s name, the assets would be distributed to shareholders.

The funds would track indexes in the recently launched S&P AMT-Free Municipal Bond Index Series, which track investment-grade muni bonds that mature between June 1 and Aug. 31 of a specific year.

These are the first ETFs that would have maturities fall within a specific date range. They act almost like muni bonds, in that they make tax-exempt distributions and return an entire investment on a specific date.

Comments

[Dean M:]

Game changer

Oct 26 10:41 AM

[Indexor:]

Could be a game changer but why pay 15+ basis points when you can buy individual muni's with the same maturity dates from most discount brokers and eliminate the annual costs of the middleman?

The positive in both scenarios is that buying either a 5-year muni or 5-year muni ETF and holding until maturity during a rising interest rate environment, will eliminate the losses of principal that should develop from ETFs like MUB and TFI.

Oct 27 11:55 AM